Germans' Economic Positivity Holds in Eurozone Crisis

by Jan Sonnenschein

Economic perceptions improve among all income groups

BRUSSELS -- Germans' attitudes about their standard of living have remained relatively buoyant throughout the recent eurozone crisis. In 2011, 31% of Germans said their standard of living was getting better -- even higher than before the global financial crisis hit in 2008. Germans' satisfaction with their standard of living has remained remarkably stable in recent years, at 88%.

Gallup surveys also show Germans' economic outlook has improved markedly in recent years. In 2011, 47% of German residents said their local economic conditions were getting better, up from 34% in 2010. The increase in optimism regarding the job situation was even more pronounced. The proportion of Germans who said that it was good time to find a job in the city or area where they lived jumped to 50% in 2011 from 22% in 2010.

These positive developments were accompanied by Germans' growing belief that they can get ahead if they work hard. More Germans said they can get ahead in life by working hard in 2011 and 2010 than in years prior.

Germans' economic confidence likely reflects efforts in Germany to remain economically strong. While Germany's highly export-oriented economy suffered a sharp downturn in 2009, as the global economy crumbled, the German government and business leaders used innovative measures, such as "Kurzarbeit," that kept employees in their jobs even during the worst months of the crisis. Businesses agreed to refrain from laying off workers and instead reduced their hours. The government in turn paid a big part of workers' lost income. By retaining their skilled staff, Germany's exporting businesses increased their exports to Asia and Latin America while demands from its most important markets in the EU were still weak.

German trade figures illustrate that the country's success story -- with unemployment dropping to its lowest level since reunification -- is based on the diversification of key markets, its strong industrial base, and the continued demand for high-quality machinery made in Germany. Economists seem to agree that German workers' wage restraints are also crucial in driving German firms' competitiveness. In addition, economists point out that German exporters are profiting from a weaker euro that enables them to export even more goods overseas.

Optimism Widespread Across Income Groups

The increase in satisfaction with living standards and other key personal economic metrics is as visible among the poorest 40% of the German population as among those who are relatively better off. For instance, 39% of those in the lower income distribution said that it was a good time to find a job in the city or area where they lived in 2011, up from 15% in 2007.

Implications

Gallup surveys demonstrate that Germans' standard-of-living perceptions and important personal economic metrics have improved since the outbreak of the financial and economic crisis in 2008 and remained stable through the recent eurozone crisis. Gallup data also suggest that even less affluent Germans are benefiting from the country's economic upswing.

These findings are likely to validate the efforts of struggling European neighbors' leaders, such as President Nicolas Sarkozy, who announced that France would benefit from shaping the country's economic policies after the German model. However, European leaders should not forget that the German success story is largely rooted in its strong export-oriented industry, which mastered the economic crises well because of an increasing demand from emerging economies in Asia and Latin America for its high-end products. It may take more than simply copying the German model to replicate Germany's economic turnaround.

Results are based on telephone interviews with at least 1,000 adults, aged 15 and older, conducted in Germany from 2007 to 2010. In June 2011, 3,044 adults were interviewed. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error ranged from a low of ±2.3 percentage points to a high of ±3.7 percentage points. The margin of error reflects the influence of data weighting. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

Europeans' and Americans' confidence in their financial institutions has followed a similar trajectory throughout the global economic crisis, suggesting a strong link between the two struggling economies.